Dealer Services Corporation Drives Business Forward With WebFOCUS
Combining Operational Reports With Predictive Analytics Is Key to Profitability for Leading Auto Finance Company
Dealer Services Corporation (DSC) is America’s largest independent inventory finance provider for used automobiles and other diversified products sold by independent and franchise dealers. Headquartered in Carmel, Indiana, the company serves 9,000 dealer customers from 75 branch locations across the United States.
In 2008, one of the sharpest downturns ever experienced by the automotive industry forced dealers to shift from selling new cars to selling used ones. But, the flurry of loan activity created as dealers pushed their used car inventories put too much of a strain on DSC’s existing information systems. This made it difficult for managers to predict the effects of changing market conditions. So, the company turned to the Information Builders WebFOCUS business intelligence (BI) platform.
With WebFOCUS, DSC can now transform the enormous volumes of transaction data – generated as loans are initiated and maintained – into vital intelligence in the form of leading and lagging indicators. This insight helps the company make better borrowing and lending decisions, and more accurately forecast future financial conditions for each dealer it serves. Additionally, managers and staff across multiple departments can now access information that is timely, complete, and consistent. As a result, DSC can better predict dealer revenues, reduce risk through more precise determination of each dealer’s credit worthiness, and stay on top of critical trends.
The Nuts and Bolts of Fleet Financing
DSC’s floor plan financing is different from a typical line of credit. Every vehicle a dealer purchases represents a separate loan. Each loan has its own terms, due dates, and related details, which generates an enormous amount of data for DSC’s branch offices to manage. Branch offices handle day-to-day account management, such as putting loans on the books and processing payments.
It’s a risky business model that requires management to carefully monitor not only Dealer Services’ own financial position, but also that of its customers. Because it borrows the money it lends to dealers, Dealer Services can get into a precarious position if it extends too much credit.
“Our success depends on having accurate information from our field offices regarding our position with each dealer,” says Chris Brady, CIO at DSC. “With this information in hand, we can predict each dealer’s future financing needs and alert them if they have more inventory than they are likely to be able to sell in a timely fashion.
“Our BI environment enables us to analyze both leading and lagging indicators. WebFOCUS continually summarizes our position with each dealer and portfolio while giving us better ways to display and distribute critical information.”
Consolidating and Distributing Information
Initially, DSC used Microsoft Analysis Services and Excel for financial and operational reporting. All branch data rolls up to a homegrown enterprise resource planning (ERP) system created with Microsoft .NET and Microsoft SQL Server technologies. As the business grew, analysts had a difficult time creating consolidated reports. They needed a single ERP system that could remove the technical barriers to accessing and sharing financial information.
“We were drawn to the sheer breadth of the WebFOCUS platform, including Active Reports, dashboards, and the various methods for creating and distributing reports,” Brady recalls. “WebFOCUS can access our cubes, data warehouses, transactional stores, Excel spreadsheets – just about any information we can think of.
“In addition to having great technology, Information Builders is great to work with. If there is ever a problem, they want to hear about it, put in the effort to fix it, and get us back on track. I haven’t seen that from other vendors. Information Builders listens to us. That’s why we enjoy working with them.”
Dealer Services quickly standardized on WebFOCUS for all its financial and operational reporting. “Previously, we had a lot of people spending vast amounts of time going through multiple reports, pulling data together, and trying to figure out what was going on,” Brady notes.
For example, spreadsheets created by each department summarized weekly activity. Senior managers received dozens of these spreadsheets each week and the data didn’t always match. The sales department might say the company has 20 new dealers, while the lending department says there are 30. “It was difficult to know who was right because you didn’t know where they got their data in the first place,” she admits.
Now, WebFOCUS generates a master report that combines data from all the pertinent business domains. WebFOCUS ReportCaster automatically distributes the report to executives, vice presidents, and regional managers. “Managers receive consistent information and can easily drill down from the corporate to the branch level,” Brady says. “The time savings are enormous. The departments don’t need to do anything because WebFOCUS creates the reports automatically from the data people have been entering all week.”
Discerning Financial Patterns From Operational Intelligence
In addition to monitoring weekly account activity, WebFOCUS helps managers predict future business trends. Using WebFOCUS Performance Management Framework (PMF), DSC measures performance against corporate goals and displays the results through WebFOCUS dashboards.
“While the master report is a summary of what has happened in the past, PMF breaks down the trends and factors that contribute to it,” Brady explains. “It draws from the same operational metrics, and then it enables people to ask ‘what if’ questions so they can predict future outcomes and see trends taking shape. For example, we can drill down to the dealer level to discern who is most likely to have difficulties based on past behavior. This not only reduces our own risk, but also helps us advise dealers so that they can be more profitable.”
Information from PMF also helps Dealer Services forecast revenue based on the expected number of loans coming in from each dealer. Will a particular dealer be likely to add five or fifty cars to its inventory next week? The answer varies with the dealer’s recent sales activity, the current season, day of the week, and many other factors.
Brady’s team used PMF to create a predictive model that forecasts future activity based on each dealer’s past behavior. “WebFOCUS PMF enables us to predict things such as when a dealer will pay off its vehicles, when they will incur new fees, and how many cars they will be adding to inventory,” she explains. “It is extremely accurate. Our forecasts are usually within two percentage points of actual revenue.”
Performance Management Framework (PMF)
WebFOCUS PMF provides enterprise metrics management and BI that measures and tracks business strategies, and automatically links business owners to their objectives.
WebFOCUS RStat, a statistical modeling workbench, facilitates development and deployment of real-time predictive models as intuitive scoring applications that can be used by professionals at all levels.
An Accurate Gauge of Industry Trends
Thanks in part to this predictive BI system, DSC saw the automotive downturn coming well in advance, giving managers time to adjust financial reserves, tighten lending standards, and scrutinize each dealer’s inventory. “We are more profitable today because we know how much revenue we expect to generate,” Brady relates. “If we see factors that will cause trouble in six months, we can take action now.”
Being able to look ahead with confidence not only mitigates risk for DSC; it also helps the company treat its customers fairly. “Determining a dealership’s credit worthiness is a complex task,” Brady adds. “Sometimes a small hiccup in business is nothing more than that. It doesn’t mean the dealer is about to close its doors.”
By continually monitoring both leading and lagging indicators, DSC can detect patterns in customer behavior and more confidently predict what may happen next. For example, DSC might suggest a dealer auction off a portion of its inventory to avoid an impending financial crunch.
Using RStat for Statistical Analysis
Dealer Services uses WebFOCUS RStat to create predictive models and deploy them as intuitive scoring applications that permit employees to make decisions based on accurate, validated predictions as they conduct both BI and predictive modeling from a single server. This type of integrated environment makes deploying a predictive scoring solution much simpler and faster than older statistical systems.
“By analyzing available data through WebFOCUS RStat, our managers get a fuller picture of how their business is likely to behave,” says Brady. “Using predictive BI, we can better assess risk associated with individual loans. RStat is a critical tool in our planning and decision-making processes.”
RStat integrates the open-source R scripting environment within WebFOCUS Developer Studio and includes commonly used data-mining routines such as regression decision trees, neural networks, clustering, and other algorithms to accelerate the process of creating statistical models. “RStat works well for us,” adds Brady. “It is integrated into WebFOCUS, which makes it easy to include new statistical models with our BI environment. You don’t have to be a statistician to figure out how to use it.”
DSC’s field staff is constantly apprised of these metrics thanks to WebFOCUS Active Dashboard technology, which consolidates multiple reports into a single view for easy analysis. Field reps can access Active Dashboards from any computer, receive them via e-mail, and forward them to customers as active PDFs that permit remote analysis.
“WebFOCUS Active Dashboards are great for people who are frequently on the road, since they can easily stay abreast of how their regions or branches are doing,” Brady sums up. “It’s a good example of why we standardized on WebFOCUS in the first place: the technology is comprehensive, well integrated, and easy to extend throughout our diverse operation.”